I have noticed that majority of my website’s visitors are Filipinos. 54% of my web traffic is coming from my countrymen so I felt compelled to make articles in Tagalog (or better to say “Tag-Lish”) in order to become more useful, easier to understand, and may further increase our knowledge on the proper use of our money and other things related to financial literacy. Now I encountered another task and responsibility, because although I made these articles in Tagalog, some of my readers demand and ask if I can make separate English versions for each article so they can share it with their friends (maybe foreigners, I don’t know) as well. So in order to please those Pinoys who are more inclined in English language, I especially made these articles for you.

Did you know that most of the Filipinos haven’t any savings and doesn’t even know the meaning of the words “Emergency Fund“? And this sickness is so common among us, from illiterate to undergrad and even those who have bachelor degrees. We, Filipinos are born to be so hardworking, hardworking for today, but tend to let tomorrow worry for itself. “Happy go lucky” as they call it. We may even attain the highest degree of education yet most of us, apply them not. And credits will always be our first option during emergency situations. This is where the words “Emergency Fund” will come. I, myself are not so very proud to confess that at first, I don’t have any vague idea of what, where, and how this Emergency Fund is.

WHAT IS AN EMERGENCY FUND?

Emergency Fund is part of our savings. As I have recently discussed (How to Make a Budget Plan), every a certain percentage of your hard earned money must be set aside for your saving purposes. Basically, this savings will be divided into three parts (can be an unequal division):

Emergency Funds

Short-Term Goals

Long-Term Goals

Among these three, your Emergency Fund must be your priority. Let’s define what an emergency fund is. An emergency fund is an approximate amount from your savings that is designated for emergency situations use only.

There are different situations where we will need this Emergency Funds such as the following:

- Job Loss

- Property Loss due to a calamity (like what happend during Ondoy, Yolanda,etc.)

- Medical Emergencies like accidents, sickness, etc.

HOW MUCH MUST BE YOUR EMERGENCY FUND?

After we have known the meaning, now let us know the target amount that we need to save to create and build our emergency fund.

According to many good financial advisers, you have to spare of about six times of the amount of your total average monthly expenses. So for example, your monthly net earnings is Php.20,000.00 and your total average monthly expenses is Php 14,000.00 (I say average since your expenses may vary). Therefore, the total amount you have to save must be about Php 84,000.00 as your Emergency Fund (Php 14,000.00 x 6 = Php 84,000). Thus, with this amount, you will be able to live a normal life and survive for six months if your company suddenly forecloses. This will also give you an ample time to find a new job.

Note however that this topic about Emergency Fund is only a part of our savings. We will continue our discussion about the short term and long term goal on my succeeding articles. We have to complete our emergency fund especially if your net average salary or income is not that big. But of course, if you have that much, you can do save for these three simultaneously.

Emergency Fund TIPS

In a real life scenario, a lot of courage is needed in controlling yourself to spend. There are lots of offer around that will entice you to do so (e.g., a mall sales or an online shopping through internet at a lower price etc.). You have to avoid this and the likes that may trigger or impulse to buy except unless if you do need them and not just want them.

Here are some of the ways to create and build your emergency fund:

Have a separate savings account and make it a “NO-TOUCH ZONE SAVINGS ACCOUNT“.

Deposit certain amount of money in your ” NO-TOUCH ZONE” account consistently (you have the option to do a monthly or bi-monthly autodebit) and treat this as part of your expenses.

Whenever your saving reaches ten thousand pesos, you can transfer it to another bank product that may have a higher interest rate. I personally don’t advice you to put them in a time deposit but instead to another investment instrument like for example UITF-FIXED INCOME fund (Under Money Market Fund), that you may able to withdraw more easily when necessary.

December Bonuses should be directly deposited to your “NO TOUCH ZONE SAVINGS ACCOUNT“.

Keep in mind that this money, no matter how big or small, must be use for emergency purposes only.

And Malls’ SALE is not an EMERGENCY!

Your relative’s emergency is not your emergency. If you can, create another account as a sort of emergency fund for helping others but never use your emergency fund for such situation.

Surround yourself with those who have a proper knowledge of handling their hard earn money and who can encourage to persevere in building your emergency fund, short-term goals and long term goals.

Once you have created your emergency fund, proceed to your short and long term goals. I will be discussing this separately on my next articles.

Always remember,the harder you work to earn a certain amount, the hardest for it to save, invest and multiply.

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